After 2 weeks with exceptionally light activity due to holidays and inclement weather in New York, bond markets get back to business today.  Not only do we have a full week of economic data with several significant reports/events, but even the weather is cooperating as NY warmed from the 10's to the 40's over the weekend.

The spooky coincidences continue with this week being the first Treasury auction cycle in 2 weeks, and the more potent 3/10/30yr variant at that.  Other contributions include:

  • The fact that 10yr yields left off last week at exactly 3.000% (more on this in the chart below)
  • The presence of relevant economic data, auctions, or Fed speakers every day this week.
  • One of the biggest insights to monetary policy in the form of FOMC Minutes on Wednesday
  • The biggest piece of monthly economic data in the form of Nonfarm Payrolls on Friday.

Ok, so maybe it's not really that 'spooky,' but taken together, the details of this week certainly add up to "back to business."

Today kicks it off with Factory Orders and ISM Non-Manufacturing, both at 10am.  Of the two reports, ISM is the bigger market mover, but neither would override tradeflow considerations if the expected glut of volume happens to carry some momentum. 

In other words, a lot of participation is returning to markets today, and if it's biased in either direction, that momentum can be an even bigger market mover than the data.  As always, Friday's NFP is bigger than all of it, but let's see how the week begins before considering how it might end.

Chart: Some Considerations Around the 3.0% 10yr Yield Level

The general area around 3.0% is a long-term inflection point that could set the stage for a bounce or merely be the staging area for the next move higher.  Any time we find ourselves back at a level that's not only a big round number, but that also acted as a standout ceiling several months earlier, there's hope that it will act as a ceiling again. 

In this case, history cautions against holding out hope for such things for very long.  While we could easily see this week turn into a pocket of consolidation in the longer-term uptrend in rates, the two most historically similar sell-offs behaved very differently.

Long Term US10YT

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
94-31 : +0-00
FNMA 3.5
99-13 : +0-00
FNMA 4.0
103-00 : +0-00
2 YR
0.4044 : +0.0204
10 YR
3.0004 : +0.0154
30 YR
3.9312 : +0.0122
Pricing as of 1/6/14 7:00AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Monday, Jan 06
10:00 ISM N-Mfg Bus Act * Dec 56.5 55.5
10:00 ISM N-Mfg PMI * Dec 54.5 53.9
10:00 Factory ex-transp mm (% )* Nov 0.0
Tuesday, Jan 07
8:30 International trade mm $ (bl)* Nov -40.0 -40.6
Wednesday, Jan 08
7:00 Mortgage Market Index w/e 351.1
8:15 ADP National Employment (k)* Dec 200 215
15:00 Consumer credit (bl) Nov 15.00 18.19
Thursday, Jan 09
7:30 Challenger layoffs (k) Dec 45.314
8:30 Initial Jobless Claims (k)* w/e 335 339
Friday, Jan 10
8:30 Private Payrolls (k)* Dec 197 196
8:30 Non-farm payrolls (k)* Dec 197 203
8:30 Unemployment rate mm (%)* Dec 7.0 7.0
10:00 Wholesale inventories mm (%) Nov 0.4 1.4